Investors question if Tesla stock is too expensive

Mar. 14, 2014
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Investors are battling over if Tesla is cheap or overvalued. A detail of the new Tesla Model S all-electric sedan at the car's unveiling in Hawthorne, California in this March 26, 2009 file photo. / ROBYN BECK AFP/Getty Images

A: Beauty is in the eye of the beholder. And with stocks, so is valuation.

It's typical for investors to disagree over what a stock is worth. And lively debate is even more common with such a hotly contested stock like Tesla.

Given the massive run by the stock over the past year, analysts are certainly cautious, seeing that it's no longer a bargain. With Tesla's stock trading at nearly $240 a share, it has already surpassed the average analysts' price target of $213. And, of the 11 analysts that cover the stock, it's rated as a hold or "underperform" by half, says Nasdaq.

By all standard metrics, the ones that experts monitor, Tesla is expensive.

Investors are paying a $26.7 billion valuation for a company that's yet to make money. Investors are paying 14.8 times the company's revenue, which is twelve times higher than the valuation on the industry, Reuters says.

The stock is "dangerously" expensive based on the current value of its expected future cash flow, says NewConstructs. Don't think, though, that just because a stock is pricey it must fall. If speculators keep jumping in, or if the cash flow forecasts are too conservative, can the stock rise further? Absolutely.